If you take the Versus/DirecTV dispute, the NHL’s miniscule TV ratings and recent ownership debacles, then add that with a recession and NFL record ratings, you’d think the NHL would be doomed. But, Forbes.com reported last week that at least leaguewide, the NHL turned a profit for its 2008-’09 season. Forbes’ research revealed a operating profit, which is earnings before interest, taxes, depreciation and amortization (EBITDA), of $6.1 million.

In the 12 years Forbes has been tracking the NHL, this is its highest figure. Additionally, the average NHL franchise’s worth is reported to be $223 million, which is $3 million more than the 2007-’08 season. Revenue from non-hockey events in NHL arenas also increased by $70 million to $2.82 billion.

So, how the heck did that happen? Well, markets such as Chicago, Pittsburgh and Washington have reinvented themselves. The Chicago Blackhawks finally allow their home fans to see home games, the Pittsburgh Penguins made two straight Stanley Cups after years of mediocrity and of course, Alexander Ovechkin’s stardom has boosted the Washington Capitals.

Local media and new sponsors are the biggest players in the revenue growth. Three major markets, Detriot, Chicago and Toronto, signed new contracts before the beginning of last season, causing a 15 percent raise up to $356 million. And, new sponsors such as McDonalds, Honda, Crisco and Visa have boosted sponsorship revenue 1.9 percent to $339 million.

But, says Forbes, the good news doesn’t apply to all NHL teams. The Pheonix Coyotes were recently purchased by the league for around $140 million, which means the league will assume the team’s liabilities until a buyer can be found. The Coyotes are not the only team struggling, the Nashville Predators and Florida Panthers are reportedly for sale and several teams, including the New York Islanders and Edmonton Oilers need new arenas.

In fact, by Forbes' accounting, 14 of the 30 clubs in the NHL posted operating losses. From as little as $800,000 in losses for the Calgary Flames to double-digit losses for the Carolina Panthers, and aforementioned Phoenix Coyotes.

Showing that the NHL can be profitable, and very much so, according to Forbes, the Toronto Maple Leafs had an operating income of $78.9 million. Other highly profitable clubs included the Montreal Canadians ($31.3 million), New York Rangers ($27.7 million), and Detroit Red Wings ($27.4 million).

To place the Maple Leafs' popularity in perspective, while the worldwide economy has taken a hit to nearly every sector, the Toronto club was more profitable this year, than last ($78.9 million in operating income compared to $66.4 million in 2008, and increase of 19 percent in profits.

Lastly, while leaguewide, revenues are up, the value of many NHL franchises have gone down from last year, in large part due to the economy. Fourteen of the 30 clubs saw their value drop from 2008 to 2009 with the highest drops coming from the Avalanche (down 11 percent), Stars (down 10 percent), and Thrashers (down 10 percent), the largest number of decliners since 2004.

The question will remain: Will the disparity between successful and unsuccessful clubs continue to widen? Clearly, as witnessed by the Coyotes, some clubs are near insolvency.

Two new general partners took over the Florida Panthers on Monday, stressing more accountability, greater professionalism and an unwillingness to accept mediocrity. The co-general managers, Cliff Viner and Stu Siegel, replace Alan Cohen who owned the team since 2001. The Panthers have not made the playoffs since 2000. Cohen said he wanted to sell the club, in part because of losing money.``I know I leave the organization in much better shape than it was when I took it over,'' said Cohen in a statement.

Select Read More to see the latest Forbes franchise valuations for each of the 30 clubs in the NHL

Sink the Mothership? VERSUS could be going after market share at some point

Is the VERSUS Network about to become a worthy competitor to ESPN? Would sports fans, leagues, cable and sat providers benefit from a merger of NBCU and Comcast? The most recent speculation surrounding the sale of NBCU revolves around comments by Vivendi CEO Jean-Bernard Levy, reiterating Vivendi’s desire to divest themselves of their 20% stake in NBCU. From Reuters;

NBC Universal could be floated on the stock market if France's Vivendi decides to sell its 20 percent stake in the group majority-owned by General Electric, Vivendi's chief executive said on Tuesday.

AND

Sources close to the discussions have said GE is negotiating a sale of a majority stake in NBCU to cable operator Comcast to create a powerhouse spanning TV broadcast, cable networks, movie and theme parks worth about $30 billion.

Such a deal would depend on Vivendi's selling its stake.

Those who are doubtful that this deal will happen frequently point to the negative reaction the rumoured deal has met with from the market. In 2004, Comcast failed to acquire a different media giant, Walt Disney Co. (which includes ESPN and ABC), a potential deal that engendered the same negative reaction. Earlier this month BusinessWeek reported;

It's become an almost Pavlovian response among Wall Street analysts and money managers: holding their noses when an executive proposes bringing content (movies and TV shows) and distribution (cable, satellite, and Internet) under one roof.

And so when investors learned on Sept. 30 that Comcast CEO Brian L. Roberts was considering a deal to take majority control of General Electric's (GE) NBC Universal (NBCU), the cable giant laid an egg on Wall Street. Its share price fell 7% the next day, to 15.67. The Street's worry was clear: Roberts' yen for NBCU's movies and TV shows would divert his executive team from the core business of providing cable TV, broadband, and phone service to Comcast's nearly 25 million subscribers.

Roberts has had a bad rap on Wall Street ever since 2004, when the cable company bid $54 billion for Walt Disney and then walked away once the Mouse House played hard to get. Roberts is mindful of that and of the Street's obsession with quarterly numbers. But he also needs to manage for the long haul. That means finding a way to offset slowing growth at Comcast, which is losing subscribers to phone and satellite companies and could suffer as more viewers move to the Web to watch movies and TV shows

Reuters reported in a separate piece concerning the possible sale of NBCU;

To some investors, Comcast's bid might trigger a sense of deja vu. In 2004, Roberts launched a hostile and audacious $54 billion bid to buy Walt Disney (DIS.N), but ultimately failed. Since then, investors have feared the cable company would make a similarly large and possibly value-depletive deal.

Those who believe that this deal makes sense see the value to Comcast in NBC’s content (including their cable channels), a stake in online video streaming website Hulu and a better position in the ongoing battle between networks and cable operators over carriage fees. Earlier this month, Brian Steinberg reported for Advertising Age;

Comcast's interest is obvious, particularly after the once-sleepy concern made a bid in 2004 for Walt Disney Co. Gaining control over NBC would give Comcast scads of content to ship over its cable and broadband lines, and it would add a raft of cable networks that have two streams of revenue -- subscription fees and advertising.

In looking at big media companies, "the best businesses that all of us have in the entertainment business are the cable content channels, and those channels, with that dual revenue stream, are really good businesses," said Stephen Burke, chief operating officer of Comcast, at a recent investor conference. "And I think we wouldn't be doing our job if we didn't try to figure out a way to get bigger in those businesses."

In a second piece on the proposed NBCU/Comcast deal, Mr. Steinberg wrote;

Media that relies primarily on ad revenue is suffering far more than those companies that have a hefty revenue stream coming directly from customers. Comcast, for example, is clearly betting that consumers will continue to be willing to pay for the content they want, when they want it. The company already gets hefty monthly fees from its cable and broadband subscribers, and it gets consumers to pay extra for premium, pay-per-view and digital video recorder options. Now it's looking to be in control of not just the pipes, but what comes through them.

Earlier the WSJ reported on the battle between TV networks and cable operators over carriage fees. Cable channels (including ESPN) have been outperforming “over the air” channels because of their “dual revenue stream” of advertising and carriage fees. As ad rates decline, CBS has successfully negotiated some deals for carriage fees and News Corp. (Fox) is seeking the same. In some markets, local TV stations are threatening to withhold their “over the air” signals from cable companies if a resolution is not found. If Comcast acquires NBCU, the WSJ reports that the stakes will rise in the “fees for carriage” dispute.

The issue could become more heated if Comcast Corp. takes control of the NBC network. Comcast, the biggest cable operator in the U.S. by subscribers, is in talks with #General Electric Co. about a transaction that would give it control of NBC Universal and its namesake broadcast network, according to people familiar with the matter. If that deal goes through, Comcast could influence how forcefully NBC will push cable operators for subscription fees. It's also possible that regulators would step in to oversee Comcast's deals with NBC and other broadcast networks.

Of particular interest to readers of this site is the impact that an NBCU/Comcast deal would have on VERSUS Network. Could this signal the beginning of VERSUS growing into a worthy competitor to ESPN?

In a separate report for the WSJ, Sam Schechner reported;

Comcast Corp. executive Jeff Shell said at an industry conference in June that expanding the sports business at his cable networks was the "top of our list over the next five years."

If Comcast's bid to control NBC Universal succeeds, it would advance Mr. Shell's goal overnight, creating a potential new rival to #"Walt Disney Co.'s ESPN.

As the cable-TV giant and NBC Universal's parent, #General Electric Co., work through details of a deal that would merge Comcast's cable networks with GE's NBC Universal, people close to the negotiations say the two companies see the creation of a combined sports business as a key benefit of a partnership.

The new company would marry Comcast's VERSUS and Golf Channel cable-sports networks and multiple regional sports networks with NBC Universal's broadcast-sports operation and rights to major sports events, including a Super Bowl and two Olympic games.

AND

VERSUS is in 75 million homes and averaged 125,000 viewers this year through Oct. 4, up 17% from a year earlier, according estimates from Nielsen Co. "We have a huge opportunity," Mr. Shell said of VERSUS at the June marketing conference in New York, to create "another sports brand in America," he said. Still, VERSUS's average number of viewers is less than a seventh of ESPN's, and just over a third of that on ESPN2.

In the aforementioned BusinessWeek piece, sports media consultant and former president of CBS Sports, Neal Pilson is quoted;

With NBC, Roberts will "have effectively created a potent competitor to ESPN," says Neal Pilson, a former CBS sports executive who now consults. Pilson figures Comcast will use NBC Sports' national platform to complement its 11 regional sports networks, which include major markets such as New York, Chicago, Philadelphia, and San Francisco. Throw in Comcast's Golf Channel and VERSUS, which has college football and pro hockey games, and the new entity clearly would give agita to executives at ESPN headquarters in Bristol, Conn.

Assuming the deal is concluded (far from certain), how would the sports industry react to VERSUS attempt to compete with ESPN? Last year when ESPN acquired the rights to the BCS, in the process obliterating any competing bid, many wondered if it was proof that ESPN could and would own the rights to any and every sports property that they wished. Did the ESPN/BCS deal hammer home the message that the ad supported “over the air” model will never compete with the “dual revenue stream” cable for sports rights? The March to Cable was one of The Sports Business Journal’s stories of 2008.

Sports have been migrating from broadcast to cable for a long time. For the past several years, late-round playoff games from MLB (TBS), the NBA (TNT and ESPN) and the NHL (VERSUS) have been telecast exclusively on cable.

But 2008 could be known as the year when the dam finally broke, thanks in large part to ESPN’s four-year, $495 million bid to poach the BCS games from Fox.

In the aftermath of the deal, broadcasters said they were unable to compete with ESPN’s dual revenue stream of affiliate and advertising fees. The big question is whether broadcasters will be able to figure out a way to compete with the newfound strength of the cable networks.

Soon after the ESPN/BCS deal, John Ourand reported for The Sports Business Journal on industry concerns over the dominance of ESPN;

…some bemoaned the fact that no other network — broadcast or cable — was able to come close to ESPN’s bid.

Obviously, there’s no recession, and all roads lead to Bristol,” said Howard Katz, the NFL’s senior vice president of broadcasting and media operations.

The deal, which saw ESPN bid $100 million more than Fox to secure the BCS rights, had attendees questioning what broadcasters had to do to be able to compete for future rights.

Cable networks, like ESPN, have an advantage thanks to their dual revenue streams from advertising and affiliate sales.

AND

As it stands now, executives seemed to be preparing for more sports to follow the money to cable, and some openly rooted for other networks, like VERSUS, to step up and compete with ESPN.

“This is going to force the market to create a competitor to ESPN,” said PGA Tour executive Gil Kerr.

A much more robust VERSUS could provide sports properties a welcome alternative to ESPN. Currently, if a sports property is not a partner with ESPN, they get less “play” from the ESPN multi media giant. The NHL, formerly an ESPN partner and a current partner of both VERSUS and NBC, has complained that their exposure on ESPN’s flagship “SportsCenter” has diminished significantly since their rights deal was not renewed.

Along with sports properties, the cable and sat providers might embrace a legitimate rival to ESPN. These industries have long been unhappy with the cost of sports programming. Disputes over “sports tiers” and carriage fees have been widespread. At $4.00 per subscriber, ESPN is easily the most expensive cable channel. By comparison, VERSUS currently charges $0.20 to $0.25 per sub. Rick Horrow wrote earlier this month for BusinessWeek (Mr. Horrow also hosts a sports business talk show on VERSUS);

Moreover, the strong platform the new entity would provide would likely give Comcast more leverage when negotiating carriage fees with ESPN. Comcast and other cable companies are paying approximately $5.8 billion to carry ESPN's seven domestic networks this year, according to the Journal. (Author’s note, “Journal” is the WSJ)

In the larger scheme, VERSUS is likely a small consideration in the discussed NBCU/Comcast deal. Should it happen, the affects on sports fans, sports properties, MSOs and ESPN will be interesting to watch. Fairly or not, there is considerable enmity in the sports industry towards ESPN, who justifiably argue that they should not be criticized over their staggering success. If VERSUS doesn’t answer the call to challenge the WWL, how long until somebody else rises to the challenge?

OTHER NEWS FROM THE BUSINESS OF SPORTS NETWORK

(THE BIZ OF BASEBALL)

• Viewership for Game 2 of World Series Up 48% From 2008
• Ricketts Family Formally Introduced as New Owners of Chicago Cubs
• Albert Pujols Named "Player of the Year" by Peers
• Special "Stand-Up to Cancer" Ad to Run During Game 3 of World Series
• MLB.com Releases "At Bat 2009" Beta for Android Devices
• Game 1 of World Series Second Most Viewed Since '99
• Game 1 of World Series Sees Massive Ratings Jump of 34%
• Terry Miller, Wife of Former MLBPA Exec. Dir. Marvin Miller, Passes Away at 90
• Details from Jamie McCourt's Divorce Filing an Eye-Popping Endeavor
• From Dodger Blue to Singing the Blues, Here Come the McCourts
• JAY-Z and Alicia Keys Performances Moved to Game 2 of World Series Due to Weather
• World Series Umpires Announced
• SALE OF CHICAGO CUBS TO RICKETTS FAMILY COMPLETED

(THE BIZ OF FOOTBALL)

• Santa Clara Co. Council Vote Allows for Exemption for Competitive Bidding on 49ers Stadium
• Dolphins Name Jim Rushton Senior VP of Corporate Partnerships and Integrated Media
• Gov. Schwarzenegger Approves Bill for NFL Stadium in Los Angeles Area

(THE BIZ OF BASKETBALL)

• NBA Opening Night on TNT Sees Highest Viewed Regular Season Double-Header Since '96
• Timberwolves Unveil Two New Seating Areas At Target Center
• NBA Kicks Off Season with 83 International Players from 36 Countries
• NBA Releases Complete Opening Day Rosters for 2009-10 Season
• Brian Byrnes of OKC Thunder Discusses Building a Brand

Pete Toms is an author for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.

Follow The Biz of Hockey on Twitter

Follow the Business of Sports Network on Facebook

The past five months I have followed, with great interest, Jim Balsille’s attempts to purchase the Phoenix Coyotes and move them to Hamilton ON. I was initially interested in Mr. Balsille’s efforts because if he succeeded, there was real potential (appeals would have been inevitable) that the structure and governance of professional sports leagues in North America would change dramatically. I followed the developments in the bankruptcy proceedings from many sources, beat writers, columnists, trade publications and sports business / sports law blogs. There was a large amount of thorough and informed reporting on both sides of our border but in Canada Mr. Balsille’s efforts also became a nationalist rallying point.

The Canadian writers assigned to the bankruptcy proceedings “beat” covered the story in the same manner as their American colleagues. Their reporting focused on the nuts and bolts of the competing bids and should Mr. Balsille succeed, the ramifications for “single entity” status. However there was an additional and broader aspect to the media coverage in Canada. Mr. Balsille’s attempt to move the Coyotes became a nationalist melodrama with Mr. Bettman the villain and Mr. Balsille the hero. Sports columnists (not to be lumped in with the beat writers assigned to the bankruptcy proceedings), newspaper editorials, political columnists, bloggers, talk radio (both news and sports), pop culture watchers, all were consistently outraged and incredulous that Mr. Bettman would not acquiesce to Mr. Balsille’s demands. Typically, Mr. Bettman’s refusal to allow Mr. Balsille to move the franchise to Hamilton was presented in two manners.

1. Gary Bettman is too stupid to understand that the NHL cannot succeed in Arizona.
2. Gary Bettman hates Jim Balsille and hates Canada. (I won’t quibble on the former).

Dozens, if not hundreds of times I have read, heard on radio or television, or been told face to face that the NHL’s stance was intellectually indefensible ( i.e. stupid ) and could only be explained by Mr. Bettman’s enmity towards our country. Over and over I was asked or overheard people express in exasperated tones, “why doesn’t Bettman want hockey in Hamilton“? What was widely misunderstood or perhaps conveniently overlooked by many Canadians was that this case was not about whether Hamilton is a better hockey market than Phoenix. This case was about much more.

• Were Mr. Balsille to succeed in moving the Coyotes franchise without the approval of the NHL it could end the long held ability of North American professional sports leagues to determine where their franchises could operate. All the “stick and ball” leagues filed briefs in the case supporting the NHL. None of Bud Selig, David Stern or Roger Goodell cares about hockey in Phoenix or Hamilton. They do care greatly about their ability to control where their franchises are located and who owns them. All of the aforementioned commissioners would have reacted identically to Gary Bettman if faced with the same challenge.
• ŸIf a second NHL franchise comes to southern Ontario, the NHL wants to be paid. Gary Bettman knows that Hamilton is a better NHL market than Phoenix but if you want to set up shop there, the NHL wants a big, fat expansion fee.
• The Buffalo Sabres and Toronto Maple Leafs want to be compensated. In other words, do leagues control “territorial rights”?

Mr. Balsille abetted the nationalist emotions and arguments that erupted during his “make it seven” campaign. Mr. Balsille adroitly positioned his attempt to bring the Coyotes to Hamilton as a patriotic act. Mr. Balsille promoted the idea that he was working to “make it seven” for the benefit of Canadian hockey fans (which is pretty much all Canadians, at least us males), particularly those “underserved” fans in the Hamilton region. Largely overlooked was that if Mr. Balsille succeeded in buying the team out of bankruptcy and moving it without the consent of the Leafs and Sabres he would open a second NHL franchise in southern Ontario on the cheap. His attempt to circumvent NHL approval via bankruptcy court would be a far better deal than buying an expansion franchise and writing expensive “territorial indemnification” cheques to the Leafs and Sabres. (As the bankruptcy proceedings progressed Mr. Balsille became more amenable to compensating the Leafs and Sabres). Mr. Balsille portrayed himself, with the unbridled cooperation of the press, as a Canadian everyman who just happened to be a billionaire. Many pieces and columns were written lauding Mr. Balsille’s selfless, patriotic efforts to rescue at least one NHL franchise from the “hockey diaspora” of the American south and bring it “home”. Mr. Balsille was photographed and interviewed in small arenas, his passion for playing “pick up” hockey widely chronicled. (Evidently he even favours a traditionally blue collar brand of beer in the dressing room) Mr. Balsille received much praise for maintaining his RIM empire in Canada, many of his acolytes arguing that it would have been more financially beneficial for him to have built it elsewhere . ( I’m not so certain and a bit offended, in that it plays to Canadian inferiority and insecurity ) Practically ignored in the fawning coverage of Mr. Balsille were the penalties he has paid over historical stock option granting practices. (In the latter months of the bankruptcy proceedings this did receive more play when attention shifted to the NHL’s rejection of Mr. Balsille on “character” issues) Instead, his philanthropy is highlighted.

Mr. Balsille’s nationalist “make it seven” campaign was unquestionably a great success in demonstrating that there is widespread support in southern Ontario for a second NHL franchise. The social networking “make it seven” website was enormously popular not only in southern Ontario but across the country. The campaign was so popular that it became a “motherhood” issue. Home Hardware and Labatts both quickly joined as corporate partners and politicians of all stripes and from all levels of government committed their support to the renovation of the hockey arena in Hamilton (no cries of corporate welfare for subsidizing the business venture of a billionaire).

I ascribe an additional motive to Mr. Balsille’s “make it seven” initiative. Mr. Balsille exploited nationalist emotions associated with hockey to pressure (ultimately unsuccessfully) Mr. Bettman in to compromising (or capitulating) on the move of the Coyotes. Every day for five months Mr. Bettman was vilified in his league’s most important market (Canada). Every day Canadian hockey fans were told that Mr. Bettman didn’t care about the NHL in their country. Worse, he was hostile toward it. If Mr. Bettman wouldn’t allow Mr. Balsille in to his club then Mr. Balsille would ensure that the NHL brand be attacked relentlessly where it is most popular.

With Judge Baum’s ruling earlier this week, the cognoscenti have concluded that the NHL will soon improve their offer and regain full control of the franchise. Most pundits think that whoever buys the club will eventually move it elsewhere. What was potentially a significant case on the legality of leagues as “single entities” has instead reaffirmed the status quo. (“American Needle” is still in doubt) In the end, more interesting than the Judge Baum’s decision, is the Canadian morality play that Bettman vs. Balsille evolved into. It galls many of us that the professional sports league we most favour and support with a religious devotion in many instances, is an American based and controlled organization. In this construct, the too smart, too slick, too New York lawyer is not deserving of protecting what is “ours”. The NHL left Winnipeg and Quebec City, cities where practically everybody is a hockey fan. Instead we have hockey in the sun belt, where practically nobody is a hockey fan. And in the morality play Gary Bettman is the imperialist, the interloper, imposing his will against the wishes of the true believers, the people who want hockey, who love hockey. Us, the Canadians.

The vilification of Gary Bettman in Canada is not new. Typically the characterization of Mr. Bettman as anti Canadian and incompetent has been the domain of sportswriters and hockey pundits. (“make it seven” was much more widespread) There is plenty that Mr. Bettman can be criticized over.

• ŸExpansion to the sun belt has been a failure.
• ŸMr. Bettman has done a poor job of vetting a number of former owners that he brought to the league (Rigas, Del Biaggio, Samueli).
• ŸAllowing the implosion of the Phoenix franchise.
• Cancellation of the 94-95 season due to labour stoppage.
• ŸThe absence of the NHL on ESPN.

The Canadian hockey media (unlike their American colleagues) are loathe to credit Mr. Bettman for.

• The NHL adding major corporate sponsors last season while the other “stick and ball” leagues were bleeding the same.
• ŸThe success of the NHL’s digital initiatives
• ŸGrowing TV numbers in the US and the New Years Classic in particular. A major accomplishment for the NHL.
• ŸA CBA which is considered the most favourable to management amongst the “stick and ball” leagues. (Whether cancelling a season in order to obtain it is debatable)
• ŸThe NHL’s TV partnership with Versus. You won’t read this in Canada but some sports media watchers (including The SportsBusiness Journal’s John Ourand) argue that it is more advantageous for the NHL to be the “big fish” on Versus rather than the “small fish” on ESPN.

Eventually we will likely “make it seven or eight”, there are plenty of NHL franchises looking for buyers and there is great demand for the NHL here. And the fundamentals that make that possible will remain in place regardless of whether either Mr. Balsille or Mr. Bettman is involved. But I think it is time for Canadians to adopt a more mature attitude towards the NHL. While we are easily the most avid consumers of this US based and operated entertainment conglomerate, we also resent that we don’t control “our game”. But “our game” is so, so much more than the NHL. Our “six” is a small part of the nexus that makes hockey our national game and a source of so much national pride and shared identity. Hockey in Canada is hockey moms, hockey dads, hockey siblings, Poutine from the arena canteen, university hockey, womens hockey, junior hockey (easily the most popular spectator sport in our country), boys and girls minor hockey, hockey on “the slab”, street hockey, air hockey, table hockey, hockey cards, sledge hockey, those big round pins with the photos of their kids in hockey gear that adorn the parkas of proud hockey parents, hockey volunteers, Wii hockey, hockey on the PSP, shinny on outdoor rinks, “mini sticks” hockey in the basement, getting up at 3 AM to watch Olympic hockey in Nagano….we could all go on and on. Hockey is ours, always has been and always will be. Gary Bettman and Jim Balsille cannot change that.

OTHER NEWS FROM THE BUSINESS OF SPORTS NETWORK

(THE BIZ OF BASEBALL)

• MLB Network to Air Critical White Sox - Tigers Game
• Blue Jays Fire General Manager J.P. Ricciardi
• Report: GM Kevin Towers to be Fired by Padres
• Pair of Minor Leaguers Suspended 50 Games Ea. for PEDs
• Orioles Exercise Option for 2010 Season on Dave Trembley Contract
• Members of Tigers-Twins Disciplined for On-Field Fracas on Oct 1
• Yankees Add Limited Number of Seats for Postseason
• Players Overwhelmingly Endorse Michael Weiner as Next Exec. Dir. of MLBPA
• TBS Announces Broadcast Teams for MLB Postseason
• Red Sox Announce Promotions of Sam Kennedy, Jonathan Gilula
• Mets Lower Ticket Prices for 2010
• Chicago Cubs Surpass 3 Million in Attendance for Sixth Season in a Row
• Yankee Stadium to Host Annual College Football Bowl Game
• Eric Wedge Fired As Manager of Cleveland Indians
• This Time It Counts: MLB Postseason TV Ratings

(THE BIZ OF FOOTBALL)

• UFL Officially Unveils Helmet Logos
• Ben Roethlisberger Lawsuit Timeline
• Football: A Game of Life and Death
• The New York Jets, David Clowney, and Twitter
• The Biz of Football Gets Blown Up in Week 3
• Verizon FiOS Offering "NFL RedZone" for Free on Oct. 4
• "Lagasse's Stadium" Design Sets New Standard for Food and Sports Experience

(THE BIZ OF BASKETBALL)

• NBA Expands Use of Instant Replay
• Q&A: NBA Replacement Referees
• Kobe Bryant Tops List of Most Popular NBA Jerseys in Europe
• AirTran Becomes Official Airline of the Orlando Magic
• ESPN, NBA Reach Agreement to Show Additional Games in UK, Ireland
• Kobe Bryant Reaches Agreement With The Panini Group

Pete Toms is an author for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.

Thursday brought yet more twists and turns to the saga that is the bankruptcy and sales auction of the Phoenix Coyotes. Friday will complete the two days of hearings and will pull the sales process closer to its end, but most likely, not to conclusion.

The hearing Thursday  in Phoenix, AZ with Judge Redfield T. Baum, presiding started by asking if there were any other bids beyond the NHL’s and Jim Balsillie, the co-CEO of Research in Motion, the creators of the Blackberry mobile device line. As reported earlier in the week, Ice Edge LLC dropped out of the bidding leaving just the league and it’s antagonist in Balsillie left to battle over the club’s rights. By the end of the hearing at 9pm ET, several issues stood out that could keep the Coyotes playing at Glendale’s Jobing.com Arena, or be forcibly relocated by Balsillie to Hamilton, Ontario, Canada, against the NHL’s current wishes. As you’ll see at the end of this list, “nothing” might be a precedent setting “something”.

1) Is Moyes a Creditor, or an Owner that has Lost Equity?

One of the main issues in that separates the bids of the NHL and Balsillie is monies that would be directed to Coyotes owner Jerry Moyes. Moyes, who slowly moved into a majority ownership position as the club slid further and further into red ink, was the one that filed for Chapter 11 bankruptcy protection, and Balsillie’s bid was submitted as a way to satisfy the creditors, including Moyes.

Balsillie’s bid includes up to $104 million that would go to Moyes as a creditor. The $104 million represents the amount that Moyes has reportedly loaned the Coyotes. The NHL’s bid has no monies outlined for Moyes, as the league is contending that the $104 million is lost equity, and therefore, would not need to be repaid. Judge Baum challenged the league’s contention in Thursday’s hearing.

2) Can the League Block Balsillie Based Upon Character?

An issue that could stop Ballsilie’s bid dead in its tracks, would be if Baum were to uphold the league’s Board of Governor’s 26-0 vote, with abstentions from the Buffalo Sabres, Pittsburgh Penguins and Toronto Maple Leafs, rejecting Balsillie as a potential owner in the NHL saying he lacks “good character and integrity".

Lawyers for Balsillie have argued that owners don’t need to “love each other”, and cite that the BOG’s vote was in reaction to any possible lawsuit that the Maple Leafs might file over relocation to Hamilton, which the Leafs see as their territory.

3) Relocation and Exiting the Jobing.com Arena Lease Agreement

Jim Balsillie raised his offer for the Coyotes by $30 million on Tuesday to $242.5 million, with $50 million set aside for the City of Glendale to offset losses incurred by the Coyotes leaving Arizona and relocating to Hamilton.  Lawyers for Glendale reject the $50 million saying Thursday that damages would be between $565 million and $685 million – a massive gap. The issue of the lease would seem very difficult to exit without compensation. As one of the lawyers characterized it in Thurs. hearing, “It’s ironclad.”

4) What Should the Relocation Fee Be?

Both Balsillie and the NHL commissioned reports to determine how much indemnification should be paid to offset losses to the Toronto Maple Leafs, and to a lesser extent, the Buffalo Sabres should Balsillie place the Coyotes in the Hamilton market, which is in proximity to both franchises. The placement of a third club will dilute the sponsorship base, television and radio territories, and available fan base, but then based upon ticket prices and current attendance figures for the Maple Leafs (both, the highest in the league), a case can be made that the market could bear another franchise. Both the Coyotes and then Balsillie commissioned sports economist and author Andrew Zimbalist (see the Business of Sports Network interviews with Zimbalist from 2004 and 2006 on The Biz of Baseball) to analyze the possible relocation of a club to Hamilton, and render a relocation figure. Zimbalist initially reported that the NHL would be entitled to between $11 million and $13 million (figures are blacked out of associated document), but testified on Thursday that the fee could be as high as $18 million. He based his figures on past relocations within the NHL to make the determination, most notably the Quebec Nordiques to Denver and the Hartford Whalers to Raleigh. Zimbalist also said on cross examination on Thurs. that his methodology had not gone through a peer review process.

The NHL countered by having two separate independent studies done that did not consult with each other having Dr. Franklin Fisher and Barrett Sports Group, LLC  and Sports Value Consulting, LLC  project a relocation fee. In a separate court filing, the NHL responded to Zimbalist’s initial figures by saying, “[T]he notion that a team in Hamilton would be worth only $11.2 million to $12.9 million more than a team in Phoenix is patently absurd.”

The NHL filing then goes on to challenge Zimbalist’s methodology in bullet point fashion. It begins by looking at a core issue: What are the Coyotes worth in Glendale and in Hamilton:

• Prof. Zimbalist understates the value of the Hamilton franchise option taken from the League by basing his estimate of that option on simple historical averages for NHL franchise expansions. This approach is inconsistent with his own view that Hamilton is an above-average site in terms of local interest in NHL Hockey.
• Prof. Zimbalist overstates the value of the Phoenix franchise option returned to the League by overlooking the fact that relocation by the Club would substantially impair the value of that option on a going-forward basis.

The filing also adds this bullet point:

• In particular, Prof. Zimbalist considers only one factor (namely, Hamilton's economic viability to support an NHL franchise) among the numerous economically relevant factors that NHL rules require the Board of Governors to consider when evaluating proposed franchise relocations. Prof. Zimbalist fails to analyze whether or how relocation of the Coyotes (absent NHL approval) would impair the League and consumers by, inter alia, (a) eroding the value of the option to locate a new NHL Club in Phoenix at some future date; (b) reducing the League's geographic diversity; (c) damaging the NHL's ability to foster community commitment to its Clubs on a League-wide basis; and (d) imposing significant operational costs on the League and its other Member Clubs.

Needless to say, the NHL’s relocation figures are in stark difference to Zimbalist’s. BSG calculated that an appropriate relocation fee would be approximately $101 million. SVC calculated that an appropriate relocation fee would approximately $195 million.

During the hearing on Thursday, the NHL lawyer Shepard Goldfein said, the relocation fee should be 60 percent of Balsillie's initial offer of $212.5 million which comes to a $127 million fee.

All of the relocation fee issues from either side may be moot in the eyes of the bankruptcy court, however.

"A big number," Baum said in reference to Goldfein’s figure. "But the relocation fee is not the most important legal issue that is going to be submitted to the court."

5) What Are the Coyotes Worth in Hamilton?

As a continued part of the NHL’s response to Zimbalist’s relocation fee amounts for indemnification to the Leafs and Sabres, the consulting firms used valuations of the Coyotes in both markets to make their determinations. This key element points to the value of the Hamilton market, as compared to Phoenix. It also outlines the league’s contention that due to the value of the market, it becomes a loss to both the Maple Leafs and Sabres, should that market be cannibalized by a Coyotes relocation to Hamilton:

BSG estimated the value of a team in Hamilton as between $261.8 million and $279.8 million. SVC estimated the value of a team in Hamilton as approximately $315 million. Aided by the actual results that the Coyotes have achieved in Glendale, the experts employed the same methodology to calculate the likely revenues for a team in Glendale and the ultimate value of a team in Glendale. BSG estimated the value of a team in Glendale as between $163.4 million and $176 million. SVC estimated the value of a team in Glendale as approximately $120 million.

It’s important to note that the valuation is a face value rendering. Any ownership that assumes the franchise in Glendale assumes the lease agreement, which, in part, has had a cobbling effect on the Coyotes. The club reported losses of approx. $60 million last season, alone.

6) The Issue of Copps Coliseum

Balsillie has worked out an agreement to have the Coyotes play at Copps Coliseum, should the club be relocated to Hamilton. The agreement between the City of Hamilton and Balsillie has two issues, one being the clock: the city is sticking to an Oct. 31 lease pact with Balsillie, whether the issue of the Coyotes is fully resolved by then. Secondly, the 24-year-old facility is hardly up to NHL standards, and therefore Balsillie has proposed a sweeping renovation to Copps that could total as much as $200 million to complete (see details of the renovation plans along with renderings of the design).

The problem is, Balsillie is not willing to fund the renovations, and there is currently no firm commitment to fund it at the government level.

The Mayor of Hamilton, Fred Eisenberger, wrote in a letter referenced in Thursday’s hearing, “I would like to assure the National Hockey League that the planning process for the renovation of Copps Coliseum is currently in progress and we are confident that a financing commitment for the project will be made by the appropriate levels of government in Canada in partnership with the City of Hamilton,” adding, “We believe the Copps renovation plan is …  well within the scope of available government funding programs.”

7) Friday Hearing to Outline Conflict of Interest in NHL Bid

On Friday, NHL Commissioner Bettman will take the stand, and will face Jeffrey Kessler and Tom Salerno, the lawyers for Balsillie and Jerry Moyes of the Coyotes. Jim Balsillie, originally scheduled for Friday, has removed himself from testifying. Bettman will surely feel the heat from Kessler, a powerful and noted anti-trust lawyer. At the heart of the questioning will be the NHL’s rejection of Balsillie by the league’s Board of Governors as a potential owner, while being engaged in the bidding process for the Coyotes. Kessler will no doubt claim that there is a conflict of interest in those two issues.

8) Complexities Could Render “No Sale” Ruling By Judge

The hearings on Thursday and Friday were designed as an auction process that would render who would ultimately gain control of the Coyotes: the NHL or Jim Balsillie. But, on Thursday, another, and more likely result was mentioned.

Judge Baum said at one point, "There is a third possibility here — no sale," which caused a stir amongst the courtroom. "It is more than theoretical. You all ought to keep that in mind."

While Baum did not specify why, as outlined above there are several reasons:

• The Balsillie bid is the highest, and therefore would satisfy the majority of the creditors, but his offer does not fully address the damages associated with exiting the Jobing.com Arena lease agreement.
• The NHL’s bid lacks details on its payment schedule for creditors, something Judge Baum was critical of at Thursday’s hearing. He informed the league to provide him with a schedule by Friday.
• The NHL’s claim that to Hamilton would be damaging seems to be tied only to how much indemnification Balsillie is willing to pay, regardless of how he has attempted to elbow his way into owning a franchise. A sizeable sum would seem address the issue, but at the end of the day, the court is not as concerned about the relocation fees as the issues of satisfying the creditors and dealing with the Glendale lease.

Not rendering a sales ruling prevents setting a precedent that would place league constitutions in the crosshairs. A ruling in favor of the NHL, and Balsillie has said he would file anti-trust charges. A ruling in favor of Balsillie, and the NHL has said they would appeal. By not ruling, based on the weak offers, Baum prevents Balsillie-like actions from occurring in the NBA, NFL, and MLB, all of which have filed briefs in support of the NHL.

Finally, by not ruling, the status quo is retained. The league will continue to look for an owner that wishes to keep the club in Glendale, while the lease agreement is addressed. Moyes and Balsillie will be left to consider other options, depending on the desires of Balsillie.

9) Addressing Other Hypothetical Scenarios

There have been other scenarios mentioned by those watching the proceedings, such as the Coyotes being liquidated under Chapter 7. That action would ostensibly be forced contraction, and in reality, impossible.

The Chapter 11 filing and Balsillie bid are designed to gain access to the Coyotes and relocate them. Selling them off would not satisfy the creditors, nor deal with the Glendale lease. It would force the NHL to hold a dispersal draft, which would mean some players would lose their jobs, and therefore, the NHLPA would look to stop the move citing interest in other markets for a sale, rather than liquidation, so players cannot be "sold" to gain money to pay back the creditors. The Coyotes are leasing Jobing.com Arena, so they can't sell the building... as mentioned, impossible to pay back creditors through liquidation.

10) Predictions

As Baum mentioned, no sale “is more than theoretical”, and therefore, seems a very real outcome of the auction process. It’s possible that with the proceedings completed, Jerry Reinsdorf and Ice Edge could come back into the mix as adjustments to the Glendale lease are explored, and the salary of Wayne Gretsky is addressed (Goldfein, the attorney for the NHL, revealed that in the Ice Edge bid that has now been withdrawn that Gretzky agreed to have his yearly salary from decreased  from approx. $8 million to $2 million).

The wild card is Balsillie. He left the courtroom on Thursday without comment, and said he would address the media on Friday. Whether Baum rules then is uncertain, but unlikely. He has said he would inform the parties involved, at the latest, before the puck drops on the 2009-10 season for the Coyotes. Their first preseason game is Sept. 15. The Coyotes open the regular season Oct. 3 at Los Angeles.

OTHER NEWS FROM THE BUSINESS OF SPORTS NETWORK

(THE BIZ OF FOOTBALL)

• NFL.com to Show Blacked-Out Games Free in Local Markets on Delayed Basis
• NFL, Steelers To Pay Tribute to 9/11 Victims Before Thurs. Game
• Former Patriots Linebacker Ted Johnson Joins NESN
• Former Patriots Linebacker Tedy Bruschi Joins ESPN
• United Football League Hires Two Former NFL Strength and Conditioning Coaches

(THE BIZ OF BASEBALL)

• Minor League Player That Had Contract Voided For Misrepresenting Name and Age, Now Suspended for PEDs
• Janet Marie Smith Rejoins Orioles as VP of Planning and Development
• IBAF Announces Additional Baseball World Cup Television Partners
• MLB Network Announces Sept. Live Game Schedule
• The Curious Case of Troy Ellerman
• LWIB: Call for Increased Revenue Sharing, Update on the Potential Sale of the Rangers, Boras on Rookie Compensation
• New Protective Helmets to be Mandatory for Arizona Fall League
• Weekend Means National Blackouts for MLB Extra Innings, MLB.TV
• Upcoming Biz of Baseball Interview: Victor Conte

Maury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He is available as a freelance writer. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network (select his name in the dropdown provided).

Follow Maury Brown on Twitter